Understanding The Range #3

Let’s assume that changing the market direction is a two step process.

It requires a qualified left shoulder and subsequently a head print.

I’m saying this to make you understand that although the move coming off of a left shoulder may swing out in the opposite direction as much as the left shoulder did, it does not change the status of the market and is not considered as another left shoulder now in the other direction.

In this example there were 5 days between the LS and the H.

The rebound form the left shoulder I call NIL+, for it goes beyond 30%. In fact what I mean is at least by one step which puts price at 45%, perhaps somewhere even at 60-70%.

I do this as a reminder for the distance as well highlighting the outermost reading as a not to be violated by 7+ pips stop level.

Although the left shoulder would eventually print, it should not be anticipated, only recognized. Instead when price blows through the last relevant NIL print by 10 pips your aim should be a failure at the next 200 level. I would look for the turn to take place 15 pips beyond the 200 line.

Our current example of the LS to NIL+ looks like this.

Once the NIL+ is set, the contraction in volatility should make price stay away.

Sure, this one is a bit different, as price seems to be well on the way to a mean reversion. It all comes down to the weekly open. I showed you before how much the bears were hammering price down at this viaduct.

The Green River is the 9-day EMA (high to low). Price is trying at the lower Guard Rail for the 3rd time.

To me the logical move would be a pull back to a head – and a new range is about to be defined.

If price was to open flat, a 36+ pips move would put the new zero level about where the last overbought print was at.

-NIL is a counter-wrap around the nearer Zero Level. The EMAs are 366 (approx E89 hourly) and 484 (E-121 hourly).

So an LS makes the market go neutral (& starts a full swing move on the pendulum), a head adds on the new direction. The Zero level to be hit is crucial, you have like 7 pips of tolerance beyond. Again, the head should not be anticipated, but once in place, the next oversold level is the perfect entry.

The only other example of the LS + H combo was an LS – OB – Fresh Zero (unlike currently) and from all heads you should see a move to the 200 (on the upside 300) line printed by the very same range, but speed may vary.